On November 29, 1999, President Clinton signed into law an appropriations bill for fiscal year 2000. P.L. 106-113. The Bill included a provision sponsored by Senator Trent Lott which created a new exemption from Superfund liability for certain transactions involving recyclable materials. This provision, the Superfund Recycling Equity Act ("Act"), is expected to have the result of shifting more than $100 million of environmental cleanup costs away from those parties who arranged for the recycling of materials covered by the Act and onto other potentially responsible parties (PRPs).
The Reed Smith Environmental Group has prepared the following description of the pertinent provisions of the Act to help you understand its scope and possible application to you:
What Does the Act Do?
The Act adds a new Section 127 to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. §§9601 et seq., popularly known as the Superfund law.
The heart of the new section is subsection 1(a), which provides an exemption from all liability under sections 107(a)(3) and (4) of CERCLA for persons who arrange for the recycling of "recyclable materials" or who transport such materials. The liability of past and present owners and operators of facilities under §§107(a)(1), (2) of CERCLA is unaffected.
Can Any Material Qualify as a "Recyclable Material"?
No. The term "recyclable material" is defined as scrap paper, scrap glass, scrap textiles, scrap plastic, scrap rubber (except whole tires), scrap metal and spent batteries. §127(b). Minor amounts of other materials which adhere to the "recyclable material" are encompassed by the definition.
The term "scrap metal" is itself further defined in §127(d) as bits and pieces of metal parts, such as bars, rods, sheets, wire and turnings, or metal pieces that can be assembled with bolts or soldering. The Environmental Protection Agency ("EPA") is delegated the authority to promulgate regulations excluding particular scrap metals from the scope of §127.
There are two express exemptions from the scope of the definition of "recyclable materials": (i) shipping containers between 30 and 3,000 liters in size which have hazardous materials inside
(thus an exemption cannot be claimed for a 55-gallon drum of waste solvent just because the drum itself is "recyclable"), and (ii) any item that contains PCBs in a concentration greater than 50 parts per million (ppm).
Other than the Fact that the Material Involved Was "Recyclable,"
What Else Must an Arranger Show to be Exempted from Liability?
It depends on which "recyclable material" was involved. Someone who arranges for the recycling of scrap metal or spent batteries and who wishes to take advantage of the exemption has to prove more elements than someone who arranges for the disposal of the other "recyclable materials."
Subsection (c) provides that a person who arranged for the recycling of scrap paper, plastic, textiles, glass or rubber needs to establish the following:
- that the material met a commercial specification;
- that a market existed for the recyclable material;
- that a substantial proportion of the material was made available for use as a feedstock for the manufacture of a new product; and
- that the recyclable material, or the product into which it was transformed by recycling, could be used as a replacement for a product made from virgin raw material.
Ninety days after the effective date of the Act, or beginning on February 27, 2000, the arranger must also exercise reasonable care to determine that the consuming facility is in compliance with federal, state and local environmental laws applicable to "recyclable material." The listed factors that determine whether the care was reasonable include the price paid; the ability of the person to detect problems with the consuming facility’s business; inquiry of relevant federal, state and local environmental agencies; and whether the consuming facility had the necessary permits.
A person who arranges for the disposal of scrap metal is required to meet every element that an arranger for the disposal of scrap paper, plastics, textiles, glass or rubber must meet. In addition, such persons must also show that they did not melt the scrap metal prior to the transaction, unless to thermally separate two or more materials by taking advantage of differences in their melting point. For transactions after November 29, 1999, the person must also demonstrate compliance with all regulations promulgated after that date which are applicable to the storage, transportation, management and "other activities" associated with the recycling of scrap metal.
Subsection (e) provides that persons who arrange for the recycling of spent batteries must
- meet all of the elements that arrangers for the disposal of scrap paper, plastic, textiles, glass or rubber must meet;
- show that they did not remove the valuable parts of the battery before arranging for it to be recycled; and
- show that they were in compliance, at the time of the transaction, with applicable regulations concerning the storage, transport, management and "other activities" associated with recycling batteries.
The protections of the exemption from liability for any "recyclable material" will be lost if the person had an objectively reasonable basis to believe
- that the material would not be recycled;
- that the recyclable material would be burned as fuel or for energy recovery or incineration; or
- that hazardous substances had been added to the recyclable material. This last provision is intended to prevent generators from adding hazardous substances to recyclable materials as a way of getting rid of the former.
Protection against liability protection will also be lost if the person "failed to exercise reasonable care with respect to the management and handling of the recyclable material" or, for transactions which took place before February 27, 2000, if the arranger had a reason to believe that the consuming facility was not in compliance with applicable laws, including any permit requirement.
Does Section 127 also Protect Against Liability under RCRA?
No. The exemption only applies to liability under CERCLA.
Does §127 Preempt State Laws which would Permit Liability to be Imposed?
No.
Does the New Exemption Have Any Retroactive Effect? What Will Happen in Pending Lawsuits or in Suits where the PRPs Have Already Entered into an Agreement to Remediate the Site?
Subsection 127(i) states that the new section does not apply to concluded cases and administrative proceedings or to pending judicial cases initiated by the United States before November 29, 1999. The exemption may be raised as a defense in pending administrative cases and in pending cases initiated by parties other than the United States. The legislative history indicates that in cases initiated by the United States, any third-party claims by the original defendants against additional defendants should be treated as cases initiated by parties other than the United States.
Section 127 does not say what effect its enactment will have where there exists a PRP agreement but neither a judicial case nor an administrative proceeding has been brought. Whether a signatory can escape from liability based on the PRP agreement will depend on the terms of the agreement and general principles of contract law.
What Happens if other PRPs Sue a Person Entitled to an Exemption under §127?
In addition to being entitled to dismissal of the CERCLA claim, the person sued is also entitled to an award of attorneys’ fees, expert witness fees and all other reasonable costs of defending the action. Whether this provision will be retroactively applied in pending contribution suits to fees incurred before November 29, 1999 appears questionable.
How will §127 be Administered?
It is self-executing, in that a person who arranges for recycling can immediately raise the defense of §127. The Administrator of the EPA is empowered to promulgate additional regulations.
What Measures Should I Take in the Future when I Send Covered Materials to be Recycled?
In addition to following all regulations that apply directly to your own storage and handling of the material, ask the consuming facility to send you a copy of the current permit, and any renewals that are issued during the course of your business relationship, and contact the local offices of the EPA, state environmental agency and any local agencies to verify that these agencies are aware of no problems with the consuming facility.